Question

Croce, Inc., is investigating an investment in equipment that would have a useful life of 8 years. The company uses a discount rate of 11% in its capital budgeting. The net present value of the investment, excluding the salvage value, is -$580,353. (lgnore income taxes.) Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided. How large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Answer 1

Croce Inc Life Net present value Discount rate 8 Years $5,80,353.00 11% To make the project financially attractive the salvage value's present value should more than or equal to $5,80,353 and by dividing it by present value of$1 @11% for 8th year we will get the value of the salvage value Present value $1 @11% for 8th Particulars Present value of salvage value needs to be vear Value of Salvage value c=b/a $13,37,219.00 Salvage value 0.434 $5,80,353.00 The salvage value needs to be equal to or greater than $1,337,219 or present value of salvage value should be greater than or equal to $5,80,353 Byrge Corporation Life 6 Years Net present value $4,75,200.00 Discount rate 13% To make the project financially attractive the Annual Intangible Benifit's present value should more than or equal to $4,75,200 and by dividing it by present value of annuity of $1 @13% for 1-6 years we will get the value of the Annual Intangible Benifit's Particulars Present valueof annuity of $1] Present value of Annual Value of Annual @13% for 1-6 Years Intangible Benifit's needs to Intangible Benifit's ceb/a 3.998 $4,75,200.00 $1,18,859.00 Annual Intangible Benifit's The Annual Intangible Benifit's needs to be equal to or greater than $1,18,859 or present value of Annual Intangible Benifit's should be greater than or equal to $4,75,200

Buy-Rite Pharmacy PaybackPeriod Formular Initial Investment / Annual Cash Flows Year Cost of Auto Salvage value 0 $30,000.00 $0.00 $0.00 1-6 Incremental Gross Incremental Net Annual Revenue | Cost Cash Flows $0.00 $0.00 $30,000.00 $32,200.00 $25,400.00 $6,800.00 $0.00 $0.00 $4,200.00 $0.00 $0.00 $4,200.00 6th Payback Period Initial Investment Annual Cash Flows Payback Period (in Years) $30,000.00 $6,800.00 4.41